Intelligent Business Practices for Monetization of Online Games

Like any business, the main challenges are converting new prospects into consumers, and then being able to retain those consumers as repeat customers. As the gaming industry develops, so too do the engagement strategies.

Unlike the days when game developers could market the latest Xbox or PlayStation games, which would result in people lining up outside of stores on the release date and pay whatever the store price was, the landscape for gaming and game monetization has significantly changed. As is pointed out by Game Sparks, “it is becoming increasingly rare for developers to be able to design and build a game, distribute it through stores, charge a premium price and then walk away onto the next project.”

However, free online and mobile gaming companies have implemented some very intelligent business practices that are proving to be extremely successful for retention of players, engagement of new consumers, and methods for monetization.

Retention

One reason for this change in landscape, and in turn development and marketing practices, is the incredibly social aspect of online gaming, particularly Massive Multiple Online games (MMOs). It stands to reason that an MMO game stands to make more profit from maintaining a select group of dedicated players who are invested enough in the game to purchase in-game expansions, than to covert a whole bunch of new players to the game who may quickly leave. This is outlined further by Thomas Debeauvais, Cristina V. Lopes, and Bonnie A. Nardi in their paper “Business Intelligence in World of Warcraft”; these are:

Return on Investment (ROI) and benefiting from in-game monetization.

Maintaining multiple players that make these games massive multiple-player games in the first place, which is the entire backbone of MMOs.

If an MMO game quickly loses players, it becomes frustrating or boring for remaining users and can quickly fall apart. This is where game design needs to be appealing enough to maintain a core group of players, and which is why “there is great interest for game designers to understand which mechanics keep players playing, and which make them buy extra game content” (Debeauvais, Lopes, Nardi).

One way to maintain player retention is to give the players what they want, meaning to “implement new features and alter the game in response to customers’ playing habits” (Debeauvais, Lopes, Nardi). This is achieved so effectively in the online gaming sector because the developers and consumers, or end users, are connected without intermediaries, so feedback can be analyzed and changes can be implemented in almost real-time.

Games as a Service

A response to customers’ playing habits and being able to make adjustments to games based on player feedback is currently being referred to as ‘Games as a Service’.

‘Games as a Service’ is one of those buzz phrases that seems a little vague and illusive, but it really means developing content and updating a game based on analytics data collected from your player base. ‘Games as a Service’ responds to consumer demands and activity and allows the developer to tailor the game design and generate targeted marketing and monetization strategies.

Free-to-Play and In-game Monetization

The main question of course after the realization of ‘Games as a Service’ is how to monopolize on this service and monetize it. More specifically, how to engage an audience on a “free-to-play” basis that also offers a way to secure revenue.

The answer to this question was in-game monetization. First introduced in the early 2000’s, the game industry adopted a “free-to-play model” once it realized that “some players were ready to spend more in the game than the monthly subscription fee they were already paying.” In this free-to-play model, companies decided to forego monthly subscriptions to allow players to “play the game for free, but were given the possibility to purchase virtual items with real money” (Debeauvais, Lopes, Nardi).

The next obvious question is how successful was this model? In 2010, the Real-Money Transaction (RMT) market, consisting of funds accumulated from purchasing virtual goods from within a game, generated $2.1bn in the U.S. alone (Debeauvais, Lopes, Nardi). In the case of the MMO Puzzle Pirates, even though it only saw 10% conversion from its free-to-play players, that 10% averaged a monthly revenue of $50 from each paying player, accumulating to a sum of $230,000 RMT per month, which was “more than three times the monthly subscription fee for World of Warcraft” (Debeauvais, Lopes, Nardi).

This is data from only one MMO, but this method is seeing great success in other areas. In fact, this Freemium Model is responsible for 60% of the success of Apps on Google Play in 2014. It is safe to say that the ‘free-to-play’ with ‘in-game monetization’ method is working quite well.